How Can Employers Use the Law to Protect their Trade Secrets from Unauthorized Disclosure by their Employees

How Can Employers Use the Law to Protect their Trade Secrets from Unauthorized Disclosure by their Employees

In this article, we shall examine how employers can protect their trade secrets from unauthorized disclosure by their employees. In considering this month’s topic we shall make considerable reference to the Trade Secrets Act BE 2545 (2002) or the “Act”. We shall begin by explaining what should be included in a suitably drafted confidentiality & non-disclosure agreement for use with staff and we shall then proceed to discuss some of the legal approaches an employer can take if an employee discloses or is planning to disclose its trade secrets to a third party without its consent.

Confidentiality & Non-Disclosure Agreement

In the business world, most employers have trade secrets which they want to protect from unauthorized release to third parties, such information can take the form of financial and technical information, software, techniques & routines, documentation such as reports & contracts, product designs, procedures, ideas, know-how, formulas, inventions, improvements, concepts, drawings, plans, price and customers lists, forecasts and strategies.

One of the most sensible and proactive ways for an employer to protect this information is to have their employees sign a suitably drafted Confidentiality & Non-Disclosure Agreement. The writer recommends that in Thailand such an Agreement should contain several key clauses to ensure that it gives the necessary level of protection to the employer, these include the following:

1. The definitions section of the Agreement should at a minimum define the following key terms which are in line with the official definitions in the Trade Secret Act:

“Trade Secrets” means Trade Information not yet publicly known or not yet accessible by persons who are normally connected with the information. The commercial value of which is derived from its secrecy and that the Controller of the Trade Secrets has taken appropriate measures to maintain its secrecy.

Recommendation: To improve clarity in the Agreement and provide increased protection to the employer the writer recommends that this definition for trade secrets also specify that a list of the trade secrets of the employer is detailed in an attached schedule. The employer should then list them in the attached schedule so that it is clear what information is protected under the contract.

“Trade information” means any medium used to convey the meaning of a statement, facts or other information irrespective of its method and forms. It shall include formulas, patterns, compilations or assembled works, programs, methods, techniques, or processes.

“Owner of Trade Secrets” means the person who discovered, invented, compiled or created the Trade Information that is a Trade Secret without infringing another party’s trade secrets or infringing upon the rightful holder’s testing result or trade information that is a trade secret.

 “Controller of Trade Secrets” means the Owner of Trade Secrets. It shall also include the possessor, controller, or caretaker of the Trade Secrets.

2. In the Agreement if the Employer is the owner of the Trade Secrets then the definition should mention this key detailunless it is in fact another party, in which case such party should be specified clearly in the definitions section.
3. The employer should also be sure to specify how long such conditions concerning confidentiality & non-disclosure must apply for. The writer recommends a lengthy time period to better protect the interest of the employer. In some cases in may be sensible to provide for ongoing or perpetual non-disclosure, particularly for those trade secrets that are especially valuable and important.
4. Ideally, the Agreement should contain a clearly worded clause which provides that the employee will not without the express written consent of their employer (Owner of the Trade Secret) release or use another party to disclose such Trade Secrets to an unauthorized third party for the duration of the specified time period unless an exception applies under the Act or such disclosure is permitted by their employer in the normal course of their work role/duties i.e. release of information to an appointed external auditor for the purpose of its official annual audit.
5. To be practical the agreement should also contain a section on legitimate exceptions whereby certain types of disclosures shall not be considered as breaching the agreement, such exceptions could include legally required releases of trade secrets to any official or government authority that is authorized by law to receive such information.
6. It would also be sensible to include a liquidated damages clause in the Agreement whereby if the employee breaches the Agreement the employer can claim the liquidated damages as specified in the Agreement. The amount of damages should be set by the employer but should be sufficiently high to ensure that the employee will comply with their obligations in the contract.

Other Legal Steps Available to Employers:

Besides having staff sign a Confidentiality & Non-Disclosure Agreement, Section 8 of the Trade Secret Act also provides another mechanism available to employers to protect their Trade secrets from being revealed by staff as this section provides that where there is clear evidence that an infringement of Trade Secrets has been committed or is imminent the Controller of Trade Secrets (i.e. normally the employer) can petition (request) the Intellectual Property and International Trade Court for either an:

1. Interim injunction, which is a court order temporarily blocking a person/party from infringing the trade secrets of the owner, in practice such an order could be used to temporarily stop a disgruntled employee from releasing trade secret information to an unauthorized third party such as a business competitor.
2. Permanent injunction which is a court order permanently blocking/stopping a person/party from infringing the Trade Secrets of the owner of such trade secrets and allowing them to claim damages from the wrongdoer.

Besides using injunctions, another legal avenue available to employers would be to sue the employee for breach of contract and sue for damages (provided that they signed a suitably drafted confidentiality & non-disclosure agreement). However if an employer wishes to take this step they should be mindful of the time limitations that are specified the Act which provide that no cases of trade secrets infringement can be brought after three years from the date where the controller of trade secrets becomes aware of the infringement and of the infringer, provided that in any case the period for taking legal action must not exceed ten years from the date of the infringement.

Should you require any legal advice on the application of the Trade Secrets Act (2002) or its application to employees then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2^nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok, Tel : (66) 2680 9710, Email: ryan@dlo.co.th or info@dlo.co.th